Losing the lead: Patents and the disclosure requirement

Abstract

This paper analyzes the patenting decision of a successful inventor in a model of dynamic technology adoption with asymmetric firms. We show that the extent of the inventor's technological headstart is decisive for his patenting behavior. The overall patenting effect consists of two parts, a protective and a disclosure effect. If the technological headstart is high the negative disclosure effect may overcompensate the positive protective effect of a patent. In this case the inventor prefers secrecy. Welfare considerations show that a patent may be socially desirable even though it delays the first adoption of a new technology.